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Why Sunrun Inc.'s Shares Popped 28% Today

An earnings beat had investors excited, but it may not tell the whole story for Sunrun Inc.

What: Shares of residential solar installer Sunrun Inc.(NASDAQ:RUN) jumped as much as 27.5% on Friday after the company reported second-quarter earnings. At 12:30 p.m. EDT, shares had come back slightly but were still up 17%.

So what: Investors were happy with Sunrun's performance as it surpassed analyst expectations. Revenue of $122.5 million beat estimates of $111.2 million, and earnings per share of $0.31 crushed the $0.51 loss analysts expected. Revenue and earnings were affected by a growing percentage of projects being sold rather than leased, so the beat should be taken with a grain of salt because the numbers aren't exactly comparable.

What really caught investors' eye is that Sunrun installed 65 MW of solar, exceeding its goal of 60 MW in the quarter. Residential solar installers have had a hard time hitting installation estimates this year, so that was a positive result.

Now what: Sunrun may be beating expectations, but it's still in a tough position in the solar market. Creation costs of $3.67 per watt is well above those of competitors like SolarCity and Vivint Solar, and falling behind the prices regional installers can offer. And the $51 million in net present value management pointed to as its long-term value creation assumes customers will renew leases in 20 years and be willing to pay a high price of energy for old equipment.

For the long term, I think Sunrun is in a tough strategic position as the solar industry moves toward more cash and loan sales, and more high-efficiency product offerings on rooftops with limited space. And with higher costs than competitors, it's no surprise shares were bouncing near a 52-week low just before today's pop. An earnings beat is great, but it doesn't change those long-term challenges facing Sunrun.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.